Elgin Company sells merchandise with a one year warranty. Sales
consisted of 2,500 units in 2012 and 2,000 units in 2013. It is estimated
that warranty repairs will average $10 per unit sold, and 30% of the
repairs will be made in 2012 and 70% in 2013 for the 2012 sales.
Similarly, 30% of repairs will be made in 2013 and 70% in 2014 for the
2013 sales. In the 2013 income statement, how much of the warranty
expense shown will be for the 2012 sales?
a. $17,500.
b. $7,500.
c. $0.
d. $25,000.

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